Survey Says: Economic Clouds Clearing?

Small businesses are starting to see some better weather in their economic forecasts, albeit with a continuing chance of clouds, according to a new report.

The Index of Small Business Optimism, conducted by the National Federation of Independent Businesses, rose to 91.7 in October, up 2.7 points from the previous month. That’s the second-highest reading this year and its strongest since May, though the index remains well below pre-recession levels and hasn’t topped 100 since October 2006. The report polled 1,910 NFIB-member businesses.

The takeaway? Business sentiment appears to be moving cautiously in the right direction. The index had spent 22 of the previous 24 months below 90, including all of 2009 — hitting a low of 81 last year. The new October report marks three straight months of increases, however, and a closer look shows some other positives.

Seven of the index’s 10 components gained in October. Perhaps the most noteworthy number was zero, as in zero average employment growth per business in October. It might not sound all that rosy, but that number has been trapped in negative territory in all but two quarters since 2007, and the NFIB says that the return to zero could indicate that small businesses are poised to ratchet up hiring.

General optimism showed a noticeable uptick, with the number of respondents who believe business conditions will improve during the next six months increasing by a net 11 percentage points from September.

The NFIB’s commentary in the report — even in the positive areas — is tinged with a certain amount of gloom, though. (It’s worth noting that the NFIB is a lobbying organization with an active political agenda.)

No matter whether the news is good or bad, to the individual owner, it can feel like there’s a gap between reports like this one and the realities of day-to-day business. But it’s still nice to check the temperature outside once in a while.